There’s a ‘secular shift’ away from credit cards: Affirm CEO

Affirm (AFRM) shares are soaring after the buy now, pay later company beat its fiscal fourth quarter revenue expectations, also narrowing its expected losses per share in the quarter.

Affirm CFO Michael Linford joins Asking for a Trend to discuss what the company is seeing about consumer behavior.

Linford explains that Affirm saw “real signs of strength” in the consumer over the last quarter, especially in categories like electronics. He notes that electronics have seen headwinds over the last year and a half, and is finally starting to recover.

“I think that’s a reflection of that consumer being very engaged. I don’t think it’s unique to us. I think there’s pockets of that elsewhere in the economy. And for us, it doesn’t matter as much where the consumer is engaged as long as they’re engaged somewhere,” he explains.

As the buy now, pay later market expands, Linford notes that it is “part of this secular shift where consumers have decided that they’d like to move away from credit cards and find alternate ways to pay for things over time.” He believes that this market has more room to grow and that the company is not constrained within these parameters.

“There’s $1 trillion of credit card debt out there, and we’re just a small drop in the bucket compared to that. So we have a lot of runway,” he concludes.

Affirm CEO Max Levchin referred to Affirm’s positive revenue results as a “killer quarter” in the company’s earnings call.

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.

This post was written by Melanie Riehl

Video Transcript

You know, you, you print uh the strong results and investors clearly liked it, Michael.

I’m just curious though, at the same time, you know, signs of, of caution with the consumer um for your investors right now, how concerned should they be about that Michael?

Given, you know, softening economy, rising unemployment rate.

I, I think we saw real signs of strength in the consumer in our data in our consumer last quarter.

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Uh One thing that I like to, to point people to is the real strength in categories like electronics and I pick out that category because you saw that category, see a lot of headwind over the past year and a half and it showed signs of life in our Q three and then in our Q four started growing very quickly.

And I think that’s a reflection of, of that consumer being very engaged.

I don’t think it’s unique to us.

I think there’s pockets of that elsewhere in the economy.

And for us, it doesn’t matter as much where the consumer is, is engaged, as long as they’re engaged somewhere, we’re so broadly distributed that we’re able to be beneficiaries of that.

And last quarter, we saw that.

Um and on the credit side, we really are continuing to see results come in line with our expectations.

And so I don’t know about the consumer outside of a firm, but I do know that the consumer, our consumer at a firm is engaging in a really constructive way and delivering really good credit results, Michael, you know, you do have um obviously rivals in the space, right?

Think Klarna afterpay.

Uh how big is your, your total addressable market, Michael, what do you think about it?

And how, how fast is it growing?

Yeah, the category is growing very quickly and the address market is big and expanding.

Um the the category is again, it’s part of the secular shift where consumers have decided that they’d like to move away from credit cards and find alternate ways to pay for things over time.

And we think the penetration rate is, you know, several multiples of where it is today and that’s an end market that’s still very growth, full ecommerce is still has underlying growth in it.

So we really don’t feel like we’re a constrained by the addressable market anytime soon.

Um You know, there’s a trillion dollars of credit card debt out there and we’re just a small drop in the bucket compared to that.

So we have a lot of runway again and we’re not feeling constraints around bumping up against addressable markets.

And that’s why, you know, a 30 plus percent growth rate in GMV.

Isn’t really that surprising in our business, Michael.

Always appreciate you coming on the show and, and take the time to walk us through the results.

Thank you.

Thanks for having me.